June 24, 2011
Vermont

Green Mountain Power parent company offers to buy CVPS

Written by Dan D’Ambrosio, Free Press Staff Writer, www.burlingtonfreepress.com 23 June 2011

A surprise bid Thursday by the Canadian parent company of Green Mountain Power Corp. to buy Central Vermont Public Service Corp. out from under another Canadian company has sharpened the debate on Vermont’s energy future.

It also had some legislators hoping that the new bid would make it less likely that Vermont might become simply an off-ramp on a Canadian-controlled electricity superhighway headed south to more populous portions of New England.

Gaz Metro Limited Partnership, based in Quebec, offered $35.25 per share for Central Vermont, 15 cents per share higher than the May 30 offer made by Fortis Inc., based in St. John’s, Newfoundland, of $35.10 per share. The Fortis deal was valued at about $700 million, while Green Mountain spokeswoman Dorothy Schnure valued the Gaz Metro offer at about $702 million.

• Gaz Metro said Central Vermont and Green Mountain customers would save more than $144 million in the first 10 years under its ownership.

• A roughly 30 percent stake in Vermont Electric Power Co. Inc. – Vermont’s electric transmission system owned by all of the utilities, known as VELCO – would pass to the state.

• That move would generate $1 million in annual income to support a low-income rate plan benefitting elderly and other customers.

Central Vermont, based in Rutland, is the state’s largest utility with about 160,000 customers. Green Mountain Power, based in Colchester, is the second largest, with about 96,000 customers.
VELCO ownership

Viewpoints expressed in the wake of the bid announced Thursday morning focused mainly on how the state’s electric system will be managed.

Sen. Ginny Lyons, D-Chittenden, said one of her concerns about the Fortis deal was about who would own VELCO. The Gaz Metro offer allayed those concerns, she said.

“I think the combination of having 30 percent of the ownership go to the state combined with the ownership of the other municipal utilities would mean 51 percent of the ownership of VELCO would stay with Vermont,” Lyons said. “That’s absolutely important. I support that.”

Lyons said the composition of ownership of VELCO is important because Canadian utilities have an interest in selling power south of Vermont, and that Vermont could become a “conduit for Canadian electricity through the state.”

“One of my concerns is VELCO will be turned into a superhighway for electricity generated from Quebec and carried to southern New England as the primary purpose of the grid, with the interest of Vermonters secondary,” Illuzzi said.

Illuzzi said the 30 percent state ownership of VELCO proposed in the Gaz Metro deal is “a step in the right direction,” but that he wasn’t yet sure that figure is sufficient.

“I think what they’re trying to do is allay the fear folks have of a grid controlled by Canadian interests with Vermont just an exit on the highway to southern New England,” Illuzzi said.

Barry Bernstein, president of the board of directors for Washington Electric Cooperative in East Montpelier, echoed Illuzzi’s reservations about the future control of VELCO, even with a 30 percent share given to the state.

“I personally feel any deal to sell a second utility to a Canadian company, if it’s going to be approved, VELCO needs to be turned into a co-op where each utility has an equal vote, with some public seats in addition, appointed by the Legislature and governor,” Bernstein said. “Even with 30 percent state ownership, you’re still talking about one utility owned by a Canadian company wielding a lot of power on issues that should have broader interest.”

But Chris Dutton, president and CEO of VELCO, said Thursday concerns about Canadian control of the transmission system were misplaced, because of the oversight the Public Service Board exercises over VELCO.

“The Public Service Board has to approve any of VELCO’s transmission construction projects,” Dutton said. “Going to the idea that somehow a superhighway of electric transmission line would be constructed to the detriment of Vermont, I think that’s just not possible because any construction of transmission facilities in Vermont would require a Public Service Board permit, and the board can issue such a permit only if it finds economic benefit to the state of Vermont.”

Mary Powell, president and chief executive officer of Green Mountain Power, said Thursday the offer to buy Central Vermont Public Service was put together in the past couple of weeks, and that she initially brought the deal to Gaz Metro for consideration.

“The crux of the message I’ve been getting out today is that shareholders will be taken care of no matter what, but no matter how you slice it, the real differentiation point is the VELCO ownership we’re offering to transfer to the public trust, as well as creating $144 million in savings from a combined entity working more powerfully for Vermonters, a proposition for Vermont that doesn’t come by every day,” Powell said.

Powell explained that a purchase of Central Vermont would give Gaz Metro control of about 70 percent of VELCO, but that after transferring a portion to the state, Gaz Metro would own about 40 percent of the transmission company, less than majority control. VELCO was created in 1957 by three utilities including Green Mountain and Central Vermont to make major upgrades to Vermont’s transmission infrastructure so power could be brought in from New York state, said Chris Dutton, president and chief executive officer of VELCO.
Proposed efficiencies

The $144 million in proposed savings to ratepayers would come from efficiencies created by combining two large entities and by natural attrition as employees retire, Powell said. The savings would be passed to customers in the form of lower rates, but Schnure said that wouldn’t mean rate decreases, but rather rates lower than they would have been without the merger.

Powell stressed there would be no layoffs at either Green Mountain Power or Central Vermont, except in certain executive management positions as both companies were brought under a single management team.

“It’s hard for me to imagine how Fortis would match $144 million in savings for Vermonters over 10 years,” Powell said.

The Gaz Metro deal also includes establishing a new headquarters office in Rutland, as well as making Rutland Vermont’s “first solar city,” Powell said.

Central Vermont Public Service released a short statement Thursday saying it had received an “unsolicited acquisition offer” from Gaz Metro that it would review in “due course based on our fiduciary responsibilities and contractual commitments to Fortis Inc.”

“This offer requires us to convene our board of directors to evaluate the proposal in depth as soon as possible,” said Larry Reilly, president and chief executive officer of Central Vermont, in a prepared statement. “Until the board of directors has an opportunity to examine the offer, we are precluded from making any further comment.”

Powell said Thursday she expected to hear back from Central Vermont on Gaz Metro’s offer within two to five business days.

Gov. Peter Shumlin issued a statement Thursday afternoon saying that while he prefers Vermont ownership of state utilities, he believed after a “first glance” that the Gaz Metro proposal has “value for Vermonters and for job creation,” bringing significant savings through consolidation without worker layoffs.

“The proposal as described also brings a piece of Vermont’s transmission company, and the value it generates, to state ownership, giving all Vermonters a seat at the table as we meet our transmission challenges,” Shumlin said in his statement.